Portfolio Margin


DEFINITION of 'Portfolio Margin'

The modern composite-margin requirements that must be maintained in a derivatives account containing options and/or futures contracts. Portfolio margin accounting requires a margin position that is equal to the remaining liability that exists after all offsetting positions have been netted against each other.

For example, if a position in the portfolio is netting a positive return, then it could offset the liability of a losing position in the same portfolio. This would reduce the overall margin requirement that is necessary for holding a losing derivatives position.

BREAKING DOWN 'Portfolio Margin'

Portfolio margin requirements have only been recently instituted in the options market, although futures traders have enjoyed this system since 1988. This revised system of derivative margin accounting has freed up millions of dollars in capital for options investors that previously was required for margin deposits under the old strategy-based margin requirements that were instituted in the 1970s.

  1. Margin

    1. Borrowed money that is used to purchase securities. This practice ...
  2. Asset Management

    1. The management of a client's investments by a financial services ...
  3. Futures

    A financial contract obligating the buyer to purchase an asset ...
  4. Initial Margin

    The percentage of the purchase price of securities (that can ...
  5. Margin Call

    A broker's demand on an investor using margin to deposit additional ...
  6. Leverage

    1. The use of various financial instruments or borrowed capital, ...
Related Articles
  1. Forex Education

    Forex Leverage: A Double-Edged Sword

    Find out how this flexible and customizable tool magnifies both gains and losses.
  2. Options & Futures

    Spreading The Word About Portfolio Margin

    An underused opportunity provided in an SEC rule can enhance returns and lower risk for spread traders.
  3. Options & Futures

    Margin Trading

    Find out what margin is, how margin calls work, the advantages of leverage and why using margin can be risky.
  4. Professionals

    Common Interview Questions for Financial Auditors

    Identify questions commonly asked at financial auditor job interviews, and learn to formulate winning responses that give your candidacy a boost.
  5. Investing

    What a Family Tradition Taught Me About Investing

    We share some lessons from friends and family on saving money and planning for retirement.
  6. Professionals

    4 Must Watch Films and Documentaries for Accountants

    Learn how these must-watch movies for accountants teach about the importance of ethics in a world driven by greed and financial power.
  7. Credit & Loans

    Pre-Qualified Vs. Pre-Approved - What's The Difference?

    These terms may sound the same, but they mean very different things for homebuyers.
  8. Options & Futures

    Cyclical Versus Non-Cyclical Stocks

    Investing during an economic downturn simply means changing your focus. Discover the benefits of defensive stocks.
  9. Active Trading

    An Introduction To Depreciation

    Companies make choices and assumptions in calculating depreciation, and you need to know how these affect the bottom line.
  10. Insurance

    Cashing in Your Life Insurance Policy

    Tough times call for desperate measures, but is raiding your life insurance policy even worth considering?
  1. How does margin trading in the forex market work?

    When an investor uses a margin account, he or she is essentially borrowing to increase the possible return on investment. ... Read Full Answer >>
  2. What is a margin account?

    A margin account is an account offered by brokerages that allows investors to borrow money to buy securities. An investor ... Read Full Answer >>
  3. How does leverage work in the forex market?

    The concept of leverage is used by both investors and companies. Investors use leverage to significantly increase the returns ... Read Full Answer >>
  4. How is margin interest calculated?

    Before running a calculation you must first find out what rate your broker-dealer is charging to borrow money. The broker ... Read Full Answer >>
  5. Can working capital be depreciated?

    Working capital as current assets cannot be depreciated the way long-term, fixed assets are. In accounting, depreciation ... Read Full Answer >>
  6. Do working capital funds expire?

    While working capital funds do not expire, the working capital figure does change over time. This is because it is calculated ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Cyber Monday

    An expression used in online retailing to describe the Monday following U.S. Thanksgiving weekend. Cyber Monday is generally ...
  2. Bar Chart

    A style of chart used by some technical analysts, on which, as illustrated below, the top of the vertical line indicates ...
  3. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  4. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  5. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  6. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
Trading Center